Debt-hit soldiers are targeted by 3,300% payday loan firm in MOD"s own magazine

Debt-hit soldiers are targeted by 3,300% payday loan firm… in MOD's own magazineLoans company sold advertising space in Ministry of Defence magazine Rising concern about the number of soldiers getting into debtNew recruits earn less than 14,000 a year and private are paid 18,000

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UPDATED:

01:15 GMT, 30 December 2012

Condemned: The MoD magazine that includes the advert for payday loans from Forces Loans, a company charging an APR of more than 3,300 per cent

The Ministry of Defence was condemned last night for cashing in on the debts of its poorest soldiers by selling advertising space in its staff magazine to a payday loans company.

For an undisclosed fee, Forces Loans, which charges an APR of more than 3,300 per cent, is promoting its loans in Defence Focus – a magazine published by the MoD and read by British troops worldwide.

The revelation comes as Army commanding officers are expressing concern about the numbers of soldiers getting into debt, and when thousands of troops are expecting to be made redundant in the latest round of job cuts.

A new recruit to the Army earns less than 14,000 and a private is paid just under 18,000.

Debt campaigners – such as the Archbishop of Canterbury Justin Welby and Labour MP Stella Creasy – have called for the introduction of legislation to cap the rates charged to soldiers on short-term loans at six per cent.

When told about Forces Loans’ adverts appearing in Defence Focus, Ms Creasy told The Mail on Sunday: ‘At the end of 2011 I received assurances the Government was taking the issue of payday loan companies targeting soldiers very seriously.

‘To find out a year later the MoD is making money from this situation is shocking. These loans are toxic for family finances. One in three payday loans is taken out to pay off another.

‘I am horrified and I will be demanding answers. Only last week I was approached by a senior Army officer urging me to do more to highlight the issues.

‘The MoD shouldn’t be lending these companies a veneer of respectability. I would expect a greater duty of care towards military personnel. Their pay varies considerably depending on whether they are deployed overseas.’

The MoD has admitted accepting Forces
Loans’ advertisements since mid-2012. The advert in the December/January
edition of Defence Focus offers cash loans designed exclusively for
soldiers.

Concern: The loans revelation comes as Army commanding officers are expressing concern about the numbers of soldiers getting into debt and thousands of troops are expecting to be made redundant

The advert carries the codeword ‘MIL’ that soldiers can use to gain access to the Forces Loans website. Another code is required to access the page offering similar deals to police officers and support staff.

Forces Loans claims it is the No 1 lender to the military. Its website sets out the terms for an immediate loan of up to 1,000 paid directly into a customer’s bank account without any credit checks taking place.

The basic amount repayable on 1,000 is 1,250 – if the money is repaid within 31 days. This is an APR of 1,284 per cent based on 31 days, but the amount can increase significantly if soldiers fail to pay up within the agreed period.

Forces Loans is a private company founded in 2004. According to Companies House records, Forces Loans’ accounts have been dormant since 2006. The Office of Fair Trading confirmed that Forces Loans renewed its consumer credit licence number in October 2012.

Last night, Defence Minister Andrew Robathan thanked The Mail on Sunday for highlighting issues surrounding Forces Loans. He promised the company’s adverts would not appear again.

He said: ‘I am grateful to you for raising this matter. While we do not wish to restrict the private lives of defence personnel, we do not want to be seen to support them taking out such expensive loans.

‘I don’t think such an advert should appear in Defence Focus and it will not in the future. I would not want any soldier being charged such a rate of interest on a loan. This is not healthy. I can see the spiral of debt into which they could fall.’

The Mail on Sunday approached Forces Loans and its director, Neville Gothold, for a comment. Both declined.